Weekly Brief: Tesla, GM and Nissan Unite to Save US EV Tax Credits

A crisis makes strange bedfellows. Last week three of the fiercest competitors on the electric vehicle front, Tesla, General Motors and Nissan, banded together to lobby for an extension on the $7,500 federal tax credit for new EV purchases.

The credit has been a boon for EV sales in the US and has helped Tesla, GM and Nissan make their EV manufacturing operations viable. The tax credit was written with a cap, however, at 200,000 vehicles sold per carmaker. Tesla just hit that number and the Chevrolet Volt and Nissan Leaf are fast approaching it as well. Right as the EV revolution gains traction in the US, the tax credit that made it possible is set to expire.

Hence the unlikely partnership. Tesla, GM and Nissan have named their ragtag group the EV Drive Coalition and it includes EV charging network companies like ChargePoint and EVgo and EV advocates like Plug In America. The coalition has a simple argument. It claims that the market for EVs still is not fully mature and that the cap will lead to fewer options for consumers and may disincentivize them to consider EVs at all, which could lead to market contraction – putting American jobs and America’s position as a global leader in the EV market at risk.

This may be true. As my colleague Siegfried Mortkowitz showed last week, government subsidies are vital to EV uptake and those countries that have most subsidized hybrids and EVs have the most vibrant EV markets. Norway, for example, offers the most generous subsidies in Europe and – surprise, surprise – has the highest level of EV penetration; 45% of all new car sales will be EVs in 2018.

Of course, just because EV subsidies work doesn’t mean that they should be a foregone conclusion. Drivers of EVs may feel clean without gas pollution escaping from their tailpipes but those same emissions are most likely still flooding out of a chimney at a power plant somewhere everytime they plug their cars into the charge ports in their garages. You say tomato, I say tomahto. We’re still polluting the planet. Of course some power generation is clean. Think about a house with solar panels on the roof that creates its own energy to power its cars and never uses a drop of gasoline in the process. However, it does show how tax credits and EVs in general fit into a much more complex conversation about the smartest and most direct ways to make positive environmental impact.

Given that the Trump administration has made it a goal to roll back environmentally friendly policies in favor of pro-gas, pro-business policies, it will be interesting to see how the EV Drive Coalition fares in the coming months. Big businesses have been able to curry favor with the administration; some have even placed their officials into prominent roles in the government, so we’ll see how it all shakes out. The EV market waits with bated breath.

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